Business rate hike 'could force many small firms to close down'

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Many small businesses could close down as a result of the upcoming business rate revaluation, experts have warned.

According to the Federation of Small Businesses (FSB), more than one in three small firms expect to see a surge in their business rates from April 1st.

Nearly half of these believe their business rates will go up by more than £1,000 a year. Meanwhile, over one in five expect their annual bill to rise by more than 40 per cent.

According to the FSB, this "rates bombshell" could have a big impact on the growth of these small businesses.

For instance, 54 per cent of those who face a rise in rates expect profits to decline, while 38 per cent are gearing up to increase their prices.

Meanwhile, 55 per cent confirmed they intend to either cancel, delay or reduce investment in their business, which the FSB warned will affect UK productivity and growth.

In addition, 19 per cent said they might have to think about selling or closing down their firm if their bills are too high.

Mike Cherry, national chairman of the FSB, commented: "While many of these businesses which may have contemplated the possibility of closure will ultimately find a way to carry on, the current level of anxiety within the small business community should worry policymakers.

"Profitability across the UK small business community is already falling. The costs of doing business for small firms are now at their highest levels since early 2014. The last thing we need is a business rates burden so heavy that it threatens the future growth prospects of our entrepreneurs."

Mr Cherry argued that the business rates system is "unfair" and "regressive", as smaller firms face "unsustainable and unaffordable rises".

He has therefore urged Chancellor of the Exchequer Philip Hammond to raise relief thresholds in his keynote Budget speech on March 8th.

Mr Cherry said this would help to protect hundreds of small businesses "currently left out in the cold". 

Furthermore, he has called on Mr Hammond to to introduce a small hardship fund to "assist pockets of firms throughout the country", as this would help to ease the sense of anxiety currently being felt among small businesses.

"The seven-year gap between this year’s revaluation and the last has stored-up all kinds of problems for our business community," Mr Cherry said.

"The solution is for the Chancellor to use his Spring Budget to announce a cross-party commission to propose measures for a replacement business tax system linked fairly to the ability to pay."

Concerns about the business rates revaluation's impact on small businesses have also been raised by James Blackman, managing partner at Cocoonfxmedia.

Speaking to SmallBusiness.co.uk, he warned that a rate hike could force the closure of many smaller firms, particularly as many are already dealing with Brexit-related uncertainties.

"Since this government has come in, business has been taxed at every opportunity from lowering the tax free allowance on dividends, auto-enrolment, national living wage and now this increase in business rates," he said.

Mr Blackman also pointed out that the negative effect of business rate hikes will be exacerbated by an increase in costs through exchange rates on imports.

"For example, software costs have gone up by 13 to 22 per cent," he said.

"If a business’s fixed costs go up the prices will go up. That will mean everything from milk to your takeaway will increase while your wages will stay the same."


Mr Blackman described this as "crazy" and insisted the government should be looking at ways of reducing business costs so the economy can grow.

For instance, he said ministers could make it a legal requirement for invoices to be paid within 30 days.

Paul Simbler, director at HOB Salons, raised similar concerns, noting that some businesses are already "on the edge", which means "all it will take is a little push to finish them off".

He has suggested that the entire rating system be scrapped, as it is "just another tax" for businesses, alongside income tax, corporation tax and VAT.

"It feels like we’re all working for the government," Mr Simbler said.

"If they actually looked at how much revenue was lost from businesses going bust then maybe they would rethink completely and do something to help."